Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: donald sew who wrote (45711)	6/13/1998 11:58:00 AM
From: j g cordes	Read Replies (4) \| Respond to of 58727

From my ISP.. for everyone to be aware of: "If you receive an email titled "WIN A HOLIDAY" DO NOT open it. It will erase everything on your hard drive. Forward this letter out to as many people as you can. This is a new, very malicious virus and not many people know about it. This information was announced yesterday morning from Microsoft; please share it with everyone that might access the Internet."

To: donald sew who wrote (45711)	6/13/1998 9:40:00 PM
From: AlanH	Read Replies (2) \| Respond to of 58727

Hi, Donald. re:I am really not that versed in arbitrage. Hope anyone could add to this topic. Although it's important to distinguish 'index arbitrage' from other program trades, I'll avoid such detail here. Despite the CNBC(Bob Pisani) assertion that program trades were not the driving force in Friday's market, programs largely contributed to the market turnaround. Looking at the TICKI chart from 1:00pET to 4:00pET, there were no less that 10 intervals (1min) where TICKI rose to 24 or higher -- in one case TICKI hit 30. Such events are widely regarded as buy programs. Historically, the effect of index option/future expiration is favorable toward the market. (Of course, a notable exception is Oct'97.) In fact, many derivatives experts will advise bullish positions going into expiry and bearish positions the following Monday (anticipating that the market will find equilibrium after expiration week). One clue as to the intent of 'arbs' is to watch open interest for near-term in-the-money OEX options as expiration nears. Another helpful clue is to understand whether arbs are rolling or settling positions -- SO, ANY FLOOR TRADERS please speak up. If settlement is to occur, it often occurs prior to expiration day (eg., Friday 6/12 thur Thursday 6/18.). Occasionally, arbs are forced into a settlement scenario at expiration. Let's assume arbs were in a long call/short put (short stock) scenario. Friday (6/12) would have been an excellent opportunity for early unwinding at a discout to parity. Stock could be purchased at discounted prices, and calls could be exercised after market at increased value. (This assumption could be supported by checking after-market options activity -- which I haven't yet checked.) A rare occurrance is that arbs will exercise long calls near the close of trading day, and cover short stock the following trading morning. (Although it is unlikely that arbs would be so aggressive over a weekend, it is a possibility for next week.) The logic of this approach is that early assignment will remove other traders' hedged positions; the natural response from such traders would be to close the (long) stock side -- creating selling pressure. So, early assigment data is valuable as a contrary indicator. To recap: Expiration weeks tend to be up weeks; open interest is a good indicator for how arbs are positioned; floor traders often have an early clue as to whether arbs 'roll' or settle; after-market and assignment data provide some hint as to what arbs are doing or going to do. Hope this is not redundant to your knowledge base. Other opinions or data points are greatly appreciated. Regards, Alan